Dealing with Financing
Buying a home is likely the BIGGEST financial investment you will ever make. The crash of a few years ago has prompted many changes in home mortgage and investment property loans. The hoops are harder to jump through and there are some brand new regulations called “TRID” that can add a little time on the process. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.
Get pre-approved. Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses above your budget. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head. Find out the most you qualify for, keeping in mind you have to spend that much.
Choose your lender carefully. Hawaii has some unusual properties and many mainland lenders do not understand them. You don’t want to get too far into the process only to find out they won’t lend on the property you have your heart set on. Your Buyers’ Agent can provide the name of several lenders for you to interview. Pick the one with whom you are most comfortable. Buying a property is stressful enough without the added stress of not liking your lender.
Choose your mortgage carefully. Today’s low interest rates are great for buyers! Lenders are offering ARMs again, in addition to 30-yr fixed rates. What will be best for you is personal. Just be sure you know the differences and make an educated decision. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money.
Do your homework before making an offer. Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood by asking your Agent to provide you with relevant sales over the last 6 – 8 months. There are sites like Zillow that provide estimates but they can be very misleading because they don’t have feet on the ground to really compare the different properties. Your agent can also provide a summary of the sales so you can see high, low, mean and average sales prices along with their days on market and what percentage of list price they have selling for. It will help you in figuring out your offer price. If it is less than asking, assume they will want to negotiate.